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45.
Refer to the figure. Assuming this market is representative of the economy as a whole, a positive
demand shock will
46.
Refer to the figure. Assuming this market is representative of the economy as a whole, a
negative demand shock will most likely
47.
Refer to the figures. Which figure(s) represent(s) a situation where prices are flexible?
48.
Refer to the figures. Which figure(s) represent(s) a situation where prices are sticky?
49.
Refer to the figures. Which figure(s) represent(s) a situation where negative demand shocks can
result in a recession?
50.
Refer to the figures. Which of the following events would most likely result in higher
unemployment?
51.
Refer to the figures. Which of the following events would most likely result in inflation?
52.
Refer to the figures. Which figure(s) represent(s) a situation where firms are likely to hold
inventories to accommodate unexpected changes in demand?
53.
Which of the following results from firms holding inventories?
26-29
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
D i f f i c u l t y : 02 Medium
Learning Objective: 26-04 Describe why economists believe that shocks and sticky prices
are responsible for short-run fluctuations in output and employment.
Test Bank: I
To pi c : Uncertainty, Expectations, and Shocks
54.
Kara's Kittens typically produces and sells at its optimal (lowest per-unit cost) level of 30
scratching posts per week. Kara's also maintains an inventory of 20 scratching posts. If prices
are sticky and there is a positive
demand shock this week resulting in demand for 40 scratching
posts, we would expect Kara's to
55.
In situations of sticky prices and negative demand shocks, we would expect firms to
56.
Which of the following statements best describes how firms respond to demand shocks under
conditions of inflexible prices?
57.
For which of the following goods and services are prices most sticky?
58.
For which of the following goods are services are prices least sticky?
26-31
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
D i f f i c u l t y : 02 Medium
Learning Objective: 26-05 Characterize the degree to which various prices in the economy
are sticky.
Test Bank: I
To pi c : How Sticky Are Prices?
59.
The average number of months between price changes for gasoline is
60.
Prices for airline tickets change on average about once per month. This would suggest that
airline ticket prices are
61.
Prices tend to be sticky because
26-32
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
D.
foreign competition discourages domestic firms from price changes.
62.
Which of the following best explains why prices tend to be inflexible even when demand
changes?
63.
Prices are particularly sticky
64.
Which of the following statements best describes price flexibility in the economy?
65.
Refer to the figures. As the economy moves from the very short run to the longer run, we would
expect
26-34
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
D i f f i c u l t y : 02 Medium
Learning Objective: 26-06 Explain why the greater flexibility of prices as time passes
causes economists to utilize different macroeconomic models for different time horizons.
Test Bank: I
To pi c : Categorizing Macroeconomic Models Using Price Stickiness
Type: Graph
66.
Refer to the figures. In terms of representing the economy,
67.
Refer to the figures. If government policy can be used to affect the level of demand in the
economy, these figures suggest that government policy
68.
The overall behavior of the economy
26-36
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
A c c e s s i b i l i t y : Keyboard Navigation
Blooms: Understand
D i f f i c u l t y : 02 Medium
Learning Objective: 26-06 Explain why the greater flexibility of prices as time passes
causes economists to utilize different macroeconomic models for different time horizons.
Test Bank: I
To pi c : Categorizing Macroeconomic Models Using Price Stickiness
69.
(Consider This) What is the difference between financial investment and economic
investment?
70.
(Consider This) Which of the following is an example of economic investment?
71.
(Consider This) Suppose that Toyota buys a factory previously owned by Chrysler Motors.
Economists would
72.
(Consider This) In 2008 and 2009, the United States experienced what has come to be known
as the
73.
(Consider This) The U.S. recession that occurred in 2008 and 2009 represented a case where
26-38
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
AACSB: Knowledge Application
A c c e s s i b i l i t y : Keyboard Navigation
Blooms: Understand
D i f f i c u l t y : 02 Medium
Learning Objective: 26-04 Describe why economists believe that shocks and sticky prices
are responsible for short-run fluctuations in output and employment.
Test Bank: I
To pi c : Uncertainty, Expectations, and Shocks
74.
(Last Word) Which of the following explanations argues that the Great Recession resulted
from asset-price bubbles caused by euphoria and debt-fueled speculation?
75.
(Last Word) According to the Austrian School, the best explanation for what caused the
Great Recession was that
76.
(Last Word) Advocates for a structural solution to the Great Recession argued that
True / False Questions
77.
The business cycle is primarily concerned with changes in the level of overall prices over
time.
78.
A sometimes short, sometimes extended period of declining output and living standards is
referred to as a recession.
26-40
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
unemployment when assessing the health of an entire economy.
Test Bank: I
To pi c : Performance and Policy
79.
The business cycle reflects both short-run fluctuations in output and long-run economic
growth.
80.
Economists and policymakers are generally more concerned about nominal GDP than real
GDP.
81.
Nominal GDP measures a nation's output in current year prices.
